HOME LOANS

Variable Rate

Your interest rate is variable, hence moves when the Reserve Bank of Australia makes changes to our national cash rate, or when your lender makes an autonomous change to their rates. Benefits and costs include however are not limited to:

 

+ Interest rate may decrease over the duration of the loan

+ Loan can generally be refinanced or repaid at any time

+ 100% Offset and Redraw often available

- Interest rate may also increase over the duration of the loan

Fixed Rate

Your interest rate is fixed, hence does not change over the fixed term. Benefits and costs include however are not limited to:

 

+ Interest Rate is set at the agreed rate, hence will not increase with changes to variable rates (This may save you money!)

+ Fixed Rates are great for budgeting, given repayments over the term are known

 

- Interest Rate is set at the agreed rate, hence will not decrease with changes to variable rates (This may cost you money!)

- Significant fees can apply when a Fixed Rate loan is repaid or refinanced within the fixed term

- Loan features such as Offset and Redraw are typically limited or not available

- Additional fees can apply relative to variable rate loans

Equity Loan

Equity Loans are much like a large credit card, however generally at near to home loan rates. Benefits and costs include however are not limited to:

+ Flexibility of being able to easily withdraw funds as required

+ Interest Only payments required

+ Interest Capitalization is often an option, negating the need for repayments as the interest charge is added to your balance providing the loan is not fully drawn

 

- Interest Rate and Maintenance Fees can be somewhat higher than regular home loans

- Interest Only payments means the balance of your loan will not reduce without additional repayments

- Interest Capitalization where applicable, results in loan balance/debt increasing over time unless repayments are made

Bridging or Home to Home

Bridging loans give you the option to purchase your new home before selling your existing home. Benefits and costs include however are not limited to:

 

+ Improves your chance of securing your dream home given your offer is not subject to the sale of your existing property

+ Affords you more time to prepare your home for sale than a subject to sale arrangement

+ Affords you more time to sell your home than a subject to sale arrangement

+ Enables you to buy your new home prior to selling your current home

+ You can move just once, rather than twice if you sell, rent elsewhere then buy your new home

 

- There is a risk of not being abe to sell your existing property, hence being burdened with a much larger debt than you intended to carry

- Bridging can be a risky business in a declining market, given you are more or less selling in a weaker market than you are purchasing

Offset

Offset is when the cash held in your transaction account reduces the interest you pay on your home loan. The two accounts are linked, such that when the lender calculates the interest you owe, they deduct the balance of your transaction account from the balance of the loan account. Benefits and costs include however are not limited to:

 

+ Your savings effectively gives you a return of the interest rate of your loan.

+ If you were to place your savings in a high interest bearing account, you would then pay tax on any interest earned. Additionally the rate you receive would likely be less than the rate of your home loan, hence the offset typically yeilds the greater return.

+ Offsetting your Investment Loan is not deemed to be repaying the loan, hence doesn't erode your tax effective debt

+ You may make use of the interest free period of a credit card to retian funds in your offset, which in turn reduces your interest on your home loan

 

- Any cash held in an offset account beyond the equivelent balance of the home loan does not receive any interest. (This could cost you money!)

Professional Packages

Professional Packages generally include a suite of products including your Home and Investment Loans, Transaction Account and Credit Card with a single Package Fee of around $120-$395 per year. For this price you often receive an interest rate discount on the loans, reduced application fees and maintenance fees, and discounts to other products such as insurances. Benefits and costs include however are not limited to:

+ Interest Rate Discounts generally result in significant savings

+ Loan Application and Maintenance Fees often waived

+ Transaction and Credit Card Accounts often receive reduced of waived maintenance fees

+ Packages work particularly well for larger or more complex account structrures

 

- Annual Fees can outweigh interest rate and maintenance fee discounts for smaller loans

- Not all benefits are relevant to all clients

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P.O. Box 953

Hillarys WA 6923

enquiries@mortgageproviders.com.au

(08) 9402 7564

© 2016 by Chad Jensen Mortgage Providers - Jensen Finance Pty Ltd ABN 64 107 164 214

Chad Jensen is a Credit Representative (Credit Representative Number 399319) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence Number 391237)

Mortgage Providers (Australia) is a Corporate Credit Representative (Corporate Credit Representative Number 397372) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence Number 391237)